A Case Study regarding the Use of Stochastic Models in Financial Audit Engagement Planning, based on the Queueing Theory
Author:
Univ. Prof. Marilena MIRONIUC, Ph. D., Univ. Lecturer Ionela-Corina CHERSAN, Ph. D., Ioan-Bogdan ROBU, Ph. D. Student
JEL:
C51, M42
DOI:
Keywords:
audit process, stochastic model, planning of the audit engagement, queuing theory
Abstract:
The quality of financial audit engagements largely depends on how each stage of the mission is planned, on the human and material resources involved, and on the time allocated for carrying out the specific activities. In fulfilling its mandate, the financial auditor must conduct a proper planning of contracted customers, to identify the key processes and the links between them to estimate the resource consumption and the number of hours affected for each activity and report the bottlenecks in the system. This could be simplified by carrying out simulations based on probabilistic models, which will estimate the time allocated to each stage of the audit process, any delays caused by congestion and not least the use of resources for a number of clients in a certain period (from contract signing until the report is issued). Performing simulations in the planning of the mission increases the efficiency and effectiveness of the audit firms’ activity, with impact on service quality. This study aims to substantiate a probabilistic model to meet the needs of audit firms in Romania, in accordance with the requirements of the profession. Based on empirical evidence and working rules issued by the Chamber of Financial Auditors in Romania, performing simulations on the proposed model by using the specialized software ARENA, may increase audit quality and adjust the noted deficiencies.